The decline and fall of the Kerala coconut

PN Venugopal

October 2, 2006

October 2, 2006. No, this is not about Gandhi Jayanti celebrations. It's about the burning of palm oil on the streets of Choorakundu, a small village of 16,000 people, 45 km from Kozhikode in northern Kerala. Those engaged in the `arson' were mainly coconut farmers, up in arms against the import and sale of palm oil. The price of a single coconut had plummeted from Rs 7 to Rs 2, and that of copra (dried coconut) from Rs 40 to Rs 18. The farmers attributed this steep fall to imports of palm oil into the land of coconuts, Kerala.

Kerala, or Keralam, got its name from kera (coconut). As anyone who has ever visited the state will know, no image of Kerala is ever complete without the swaying fronds of the coconut palm. For centuries, coconut trees and coconuts have played a vital role in the everyday life and economy of the state. There was a time when a mother, living on her "five cents of land" with two coconut trees, could ask her child to rush to the provision shop with two coconuts that they had somehow managed to pull down with a pole, and exchange them for some rice and salt for a meal. Or, as evening set in, her husband would surreptitiously pluck four or five nuts and exchange them for a bottle or two at the village toddy shop! The coconut was once equivalent to cash in Kerala's rural economy.

"Yes, I could balance my household budget with the help of my coconut trees," says Raghavan of Udayanapuram, a village 45 km from Kochi. Raghavan owns 50 cents of land and has 25 coconut trees around his modest house. "I used to get 750 coconuts, on an average, every 45 days, and there were a few occasions when I could sell the lot for over Rs 5,000, at Rs 7 a coconut."

This was the case a decade ago. Over the last few years, the price of coconuts has been fluctuating wildly, and along with it the fortunes of small landholders like Raghavan.

Although coconuts are cultivated on nearly 9 lakh hectares of land, constituting almost 30% of the state's cropped area, there are very few large coconut plantations in Kerala. More than 95% of coconut trees are grown in the front and back yards of homesteads. A household with even 10 trees would often have nuts to spare after its own needs were taken care of; these would be collected by small-time buyers who would, in turn, sell them to big players who converted the nuts into copra to sell to big oil companies in Mumbai and other cities. It is decisions made at this end of the chain that determine the price that Raghavan in tiny Udayanapuram gets for his coconuts. With slices of the pie taken away with every change of hands, the system already has enough potential for farmers to be fleeced. Trade policies and practices that have emerged over the past decade have only added to their woes. The price of coconuts has been falling all through the 1990s, with the exception of 1997. The average annual fall in price was 8.64% between 1996-97 and 2001-02.

Palm oil was virtually unheard of in Kerala until the 1990s; it was coconut oil all the way. The advent of palm oil drastically altered the scenario. India, which is one of the largest importers of edible oil in the world, imports 35 lakh tonnes of palm oil, mainly from Malaysia and Indonesia. There has been a sharp increase in palm oil imports during the post-1998 period, which also witnessed a sharp decline in import duty. According to the Uruguay Round of the World Trade Organisation (WTO), India can impose a maximum duty of 300% on palm oil. In 1985, the basic tariff was 200%. By 2000-2001, it was reduced to 100%, even though Quantitative Restriction (QR) bound tariffs were not required to be revised until 2004.

There have been allegations that import duties are often slashed to win favours in other sectors. In 2001, the then prime minister A B Vajpayee, during a visit to Malaysia, announced that import duty on palm oil would be reduced to 75%. Kyodo News International, a news agency based in Malaysia, said in its dispatch that day: "As part of a sweetener to the deal, Malaysia has awarded Indian Railway Construction International Ltd a $ 1.5 billion contract to build a 300 km electrified double-track rail network linking Ipoh to Padag Besar." There is not much doubt where the Indian government's priorities lay.

The duty reduction syndrome has not changed with the change in regime. The present rate is 60% and it will remain so at least till the end of this year, according to a government notification.

The `unkindest cut' for the coconut farmer was yet to come. In the early days, not many people in Kerala cared for palm oil. Then it was put into the Public Distribution System (PDS) -- not in regular ration shops but in outlets of the Kerala Civil Supplies Corporation during festivals like Onam, Christmas and Ramzan. While coconut oil was sold at around Rs 50, the hugely subsidised palm oil was being sold at Rs 20. Long queues in front of retail outlets became a common feature. It is worth noting that coconut oil never acquired the status of a PDS item.

It was only a matter of time before palm oil became a routine shopping item. Says Sebastian P Augustin, an agriculturist from Kasargode, who received the Kerala government's Kera Kesari Award for best coconut farmer in 1998-99: "Hotels and establishments that make chips etc quickly shifted to palm oil, and that was a body blow to the coconut farmer." Palm oil also replaced coconut oil in the soap-making industry.

"It's more of a psychological game," says Fr Mathew Vadakkemuri of the India Farmers' Movement (INFAM), an organisation of farmers formed in 2000 with the objective of protecting the interests of agriculturists. "It is not so much the increase in consumption of palm oil but the exploitation of any announcement of duty reduction for palm oil by the `Bombay lobby'. They reduce the purchase price of coconut oil, claiming that the price of palm oil is coming down due to the import duty cut and that the demand for coconut oil will diminish further."

"There is no such thing as a `Bombay lobby'," says P Balachandran Nair, marketing officer, Coconut Development Board (CDB), Kochi, a central government undertaking. "The volatility of the price of coconuts is due to factors that are as yet undecipherable. But it is certainly not due to government policies." According to him, imports of coconut products from Sri Lanka or the Philippines, under various Free Trade Agreements (FTAs), are minimal and do not impact the price of coconut or coconut oil. "Only 26,000 tonnes of coconut oil cake have been imported and very little of desiccated coconut," he says. But his figures are from 2002-03, and sources that prefer to remain unnamed say that things have changed drastically in the last three years.

Nair does concede, however, that oil majors like Tata import crude coconut oil, refine and export it. There is no answer to the question of why crude coconut oil is imported when there is plenty available within the country. However, Dr Muraleedharan, director, CDB, Kochi, is more forthcoming: "For the time being we've managed to keep imports down. But for how long, we do not know." He is obviously referring to the FTA with ASEAN countries that is all set to go on stream from January 1, 2007. The ASEAN contract promises all sorts of duty concessions on imports of agricultural products.

The spate of suicides by farmers in Kerala cannot be directly attributed to the fall in coconut prices. Debt incurred for coconut cultivation is minimal, especially when compared to other crops. "It is single crops like pepper, cardamom or rubber that ruins farmers and drives them to desperate acts," says Fr Vadakkemuri. Augustin agrees. "Coconut gardens leave abundant scope for intermingling crops," he says. "So I have pepper, vanilla and various vegetables in my six-acre plot, and I can withstand fluctuations in the price of coconuts."

That is certainly a shrewd move, but it cannot take away the fact that he is being driven by market forces. The mantra is `cultivate what the market wants' rather than `find a market for what is cultivated'.

Less income translates into less care and fertiliser for the plants. Average yields have declined and, in 2004-05, productivity per hectare was only 6,379 nuts in Kerala, while it was 9,083 in neighbouring Tamil Nadu. Diseases like root wilt and mite, too, have contributed to the decline. But the main reason is loss of heart among the farmers and the feeling that the future of the coconut is bleak.

"Earlier, I could ask for an advance from the buyer and manage my family's expenses," says Sugathan of Kaipamangalam, a village in Thrissur district. "Then, the buyer could be certain that within a fixed period he would get 1,000 coconuts. But now he is no longer confident. The price is so volatile that the small buyer cannot risk an advance."

To return to the woman who could pull down a couple of coconuts to buy the bare essentials for the family, and her husband who could indulge in the mild intoxication of toddy by bartering a few coconuts, why is it that they are unable to do so now, even during the rare months when a coconut could fetch them Rs 5? "I agree that the price of coconuts has not kept up with the times or with inflation," concedes Nair of the CDB. Twenty years ago, the maximum price a coconut could fetch was Rs 7; today, the situation remains the same.

If macro-level arithmetic is required to understand the coconut scenario in Kerala, the state's production in 2004-05 was 5,727 million nuts, according to the CDB. The fall in value by a mere Re 1 results in a loss of Rs 572.7 crore to Kerala's economy.

The Kerala Karshaka Munnetta Samithi claimed in 2000 that the `palm oil-free' village of Koorachundu inspired many neighbouring areas, and that the message spread to 175 other villages. But clearly the message has not been taken on board by the policymakers and powers-that-be that continue to hold sway over the fortunes of the coconut farmers of Kerala.

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Kerala, or Keralam, got its name from kera (coconut). As anyone who has ever visited the state will know, no image of Kerala is ever complete without the swaying fronds of the coconut palm. For centuries, coconut trees and coconuts have played a vital role in the everyday life and economy of the state.

Palm oil was virtually unheard of in Kerala until the 1990s; it was coconut oil all the way. The advent of palm oil drastically altered the scenario. India, which is one of the largest importers of edible oil in the world, imports 35 lakh tonnes of palm oil, mainly from Malaysia and Indonesia. There has been a sharp increase in palm oil imports during the post-1998 period, which also witnessed a sharp decline in import duty.